I got this today from AAII (guess who they're talking about):
Investors are constantly told to read prospectuses and annual reports. Yet many do not. This is a shame because doing so can reveal important information.
Consider the following details from a registration statement that was recently filed with the U.S. Securities and Exchange Commission (SEC):
The company has a very limited operating history and profits have only been realized during the past three years.The primary source of revenues is advertising, but customers are changing to a platform (mobile devices) that the company does not generate any meaningful revenue from.Subscriber growth will slow because of the company’s high penetration rates in its current markets.The CEO controls the majority of all voting power, including final say over who gets elected to the board of directors. Furthermore, because the company is a “controlled company,” the board of directors does not have to be independent.The CEO says his company “was not originally created to be a company” and that he has “always cared primarily about [the company’s] social mission.”Last year, the company spent nearly $700,000 on a corporate jet used in part to fly the CEO’s friends and family.The company anticipates that a substantial number of shares could be sold up to 18 months following the completion of its initial public offering.
If this was all you knew about the company, would you buy shares in it?